Nigel Wilson: Bold plan for the North can emulate and better London

Much of that action will have to be driven in the North – central governments are not always great at delivery. But devolution deals give the opportunity not just to create a vision for cities and regions, but also to actually deliver that vision.

Inspired local leadership in my experience works much better than waiting for ‘the man from Whitehall’ to make something happen. You have to self-determine your own success.

This has been our lesson from Salford, Newcastle and Leeds and indeed Scotland and Wales – places where we at Legal & General are investing billions of pounds to help inspired local governments of all political persuasions regenerate and revive their cities. There is already a growing consensus around the need for a much greater focus on our Northern cities and regions.

For us, the starting points are economic. The gap between London and our Northern cities, in terms of GDP, incomes and productivity, is simply too wide. It is unusual to have this concentration of wealth in the capital city – we need stronger cities outside the capital, much as Germany has with Berlin, Frankfurt, Hamburg and Munich, or the US with a range of strong cities including San Francisco, Denver, Austin and so on.

It is in the national interest to foster growth outside London. It is in the cities of the North that we can make the most impact in closing the 30 per cent productivity gap we have with international competitors, and where our investment can make the most difference, not least because land prices are lower and regeneration more affordable than in London. We should not envy London, but emulate and indeed better what has been achieved there.

The UK’s investment rate is around 17 per cent of GDP. That’s four points lower that the OECD average, at least £50 billion less than it should be, and has been falling for most of the last 30 years. This is ironic given there has never been so much money in the world, earning such low returns. The rational action for many investors is therefore to invest more in real assets – not just to drive up the already high prices of existing assets but to create new assets.

We need to recognise that many of our historically-great Northern cities were not overbuilt, but under-demolished. Local government needs to use the powers it has to help with land assembly, including through planning and compulsory purchase, and it needs to be imaginative when it comes to funding of regeneration and infrastructure projects.

As the UK works through Brexit, there will be opportunities for cities and regions to “lean in” to the process. The devolution deals done so far create opportunities for this, but as the devolution process evolves, there will be more to be done. Greater fiscal autonomy will be one way forward. If central control can be replaced with greater empowerment for devolved local government in the next phase of devolution, then more powers can be made to raise or retain taxes, and to borrow to finance infrastructure projects.

Ideally, we would see creative initiatives: tourism taxes, for example, new funding techniques for infrastructure and transport projects within cities and regions, novel approaches to the conundrum of taxes and business rates for digital versus physical businesses. We could also see much more effective use of land in the control of devolved or local authorities or other regional public sector bodies – including potentially components of NHS estates or council land that can be utilised alongside private investment for the provision of modern social are facilities for our ageing population.

This is not just desirable – there is an imperative to take action. Brexit will add costs to businesses and, in the short-term at least, reduce the tax take. There will be less southern tax receipts to send northwards – a challenge, but also potentially an opportunity.

Brexit will also drive a need to replace the key elements of EU regional funding: European Social Fund, European Regional Development Fund and probably European Investment Bank money. The mooted “Shared Prosperity Funds” will hopefully increase the ability of devolved authorities and local government to direct public sector financing to where it can have the most positive impact.

In earlier times, our Northern cities sat powerfully astride the industrial revolutions of the day: in steel and heavy engineering, textiles, shipbuilding and manufacturing. We should look to show the same ambitions around the fourth industrial revolution. Be bold, be loud, be proud.